Obama Peddles a Dangerous Fantasy About the Debt Crisis

Fiscal Policy: President Obama now says the deficit problem is all but fixed, so we can stop all this unpleasant talk about spending cuts and get on with government spending. Maybe this is good politics, but it's reckless policy.

In the run-up to his State of the Union speech, Obama was running around telling everyone how we've already "cut our deficit by more than $2.5 trillion," and are now "more than halfway towards the $4 trillion in deficit reduction that economists . .. say we need to stabilize our debt."

Clearly Obama wants all the dreary talk of deficits off the table. That way he can attack Republicans who try to impose deeper spending cuts, and push for more federal "investments" to help grow the economy.

But there are just two problems with Obama's claim.

First, despite what Obama says, the debt crisis is nowhere near fixed — as anyone who's looked at the report from Obama's own debt commission would know.

That report opened with this stark statement: "Our nation is on an unsustainable fiscal path." Left unchecked, it said, the rising debt "will put America at risk," and that "continued inaction is not a viable option."

The panel also made it clear that stabilizing the debt would require a huge, long-term commitment to spending restraint at every level of government, as well as an overhaul of out-of-control entitlement programs.

When the commission filed its report in 2010, the national debt was $9 trillion, or about 63% of the nation's GDP. The national debt today is over $12 trillion, and has already surpassed 76% of GDP.

Had the debt commission's plan been adopted, the deficit this year would be $646 billion, and on its way down to $279 billion by 2020. And the debt would be holding steady at about 65% of GDP.

Instead, this year's deficit will be $845 billion — even after the alleged $2.5 trillion in savings that Obama touts — and will start climbing again in three years, reaching back up to $1 trillion by 2023, according to the latest forecast from the Congressional Budget Office.

The national debt, meanwhile, never drops below 73% of GDP, according to the CBO, and starts climbing after 2018, reaching 77% of GDP by 2023.

Even that forecast is optimistic, since it assumes ObamaCare costs don't explode and that there's no recession over the next decade.

Meanwhile, on the same day Obama delivered his State of the Union speech, the head of the Congressional Budget Office warned Congress that the country will continue its charge toward the fiscal cliff unless "significant changes" are made to entitlements.

But rather than push for anything like that, Obama wants to call it "Mission Accomplished" after a couple rounds of relatively tiny and mostly phantom spending cuts and no meaningful entitlement reforms.

And that gets to the second problem with Obama's claim — that more Keynesian-style government "investments" will boost economic growth.

In case anyone has forgotten, we've just been subject to the longest sustained experiment in Keynesian economics in the nation's history, with spending and deficits at historic highs for four straight years.

Obama four years ago predicted that his economic policies would produce 4.6% GDP growth by 2012 and an unemployment rate of just 6%.

Actual results: GDP climbed just 2.2% last year and the unemployment rate has never dropped below 7.8% since Obama took office.

Obama might honestly believe that the nation's long-term fiscal picture is just fine. But woe to the country if anyone else buys into his fantasy.

Fiscal Policy: President Obama now says the deficit problem is all but fixed, so we can stop all this unpleasant talk about spending cuts and get on with government spending. Maybe this is good politics, but it's reckless policy.

In the run-up to his State of the Union speech, Obama was running around telling everyone how we've already "cut our deficit by more than $2.5 trillion," and are now "more than halfway towards the $4 trillion in deficit reduction that economists . .. say we need to stabilize our debt."

Clearly Obama wants all the dreary talk of deficits off the table. That way he can attack Republicans who try to impose deeper spending cuts, and push for more federal "investments" to help grow the economy.

But there are just two problems with Obama's claim.

First, despite what Obama says, the debt crisis is nowhere near fixed — as anyone who's looked at the report from Obama's own debt commission would know.

That report opened with this stark statement: "Our nation is on an unsustainable fiscal path." Left unchecked, it said, the rising debt "will put America at risk," and that "continued inaction is not a viable option."

The panel also made it clear that stabilizing the debt would require a huge, long-term commitment to spending restraint at every level of government, as well as an overhaul of out-of-control entitlement programs.

When the commission filed its report in 2010, the national debt was $9 trillion, or about 63% of the nation's GDP. The national debt today is over $12 trillion, and has already surpassed 76% of GDP.

Had the debt commission's plan been adopted, the deficit this year would be $646 billion, and on its way down to $279 billion by 2020. And the debt would be holding steady at about 65% of GDP.

Instead, this year's deficit will be $845 billion — even after the alleged $2.5 trillion in savings that Obama touts — and will start climbing again in three years, reaching back up to $1 trillion by 2023, according to the latest forecast from the Congressional Budget Office.

The national debt, meanwhile, never drops below 73% of GDP, according to the CBO, and starts climbing after 2018, reaching 77% of GDP by 2023.

Even that forecast is optimistic, since it assumes ObamaCare costs don't explode and that there's no recession over the next decade.

Meanwhile, on the same day Obama delivered his State of the Union speech, the head of the Congressional Budget Office warned Congress that the country will continue its charge toward the fiscal cliff unless "significant changes" are made to entitlements.

But rather than push for anything like that, Obama wants to call it "Mission Accomplished" after a couple rounds of relatively tiny and mostly phantom spending cuts and no meaningful entitlement reforms.

And that gets to the second problem with Obama's claim — that more Keynesian-style government "investments" will boost economic growth.

In case anyone has forgotten, we've just been subject to the longest sustained experiment in Keynesian economics in the nation's history, with spending and deficits at historic highs for four straight years.

Obama four years ago predicted that his economic policies would produce 4.6% GDP growth by 2012 and an unemployment rate of just 6%.

Actual results: GDP climbed just 2.2% last year and the unemployment rate has never dropped below 7.8% since Obama took office.

Obama might honestly believe that the nation's long-term fiscal picture is just fine. But woe to the country if anyone else buys into his fantasy.

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